Jamie Loch: Yeah. Thanks for the question, Scott. Yeah, I think you’re picking up on a couple of really important trends. One is on SmartSense’s gross margins and the Solutions’ gross margins. We do think that that’s sustainable, it’s showing the power of an ARR model for — as a reminder, our Solutions group is subscription-only. We also are seeing some opportunities in SmartSense move to more of what we call an asset model or an OpEx model where there isn’t as much product or one-time revenue because that revenue is baked into a multiyear contract. And for some customers, that’s a preferred way of doing business. We don’t force that model, but we do embrace it for those customers that want to pursue more of an OpEx model. The Ventus situation, as I mentioned, in an earlier question, we did see some pressure in 2023 from a particular financial service.
You all know about the regional bank crisis that did have an impact on some ATM networks. We think really that is behind us. And so as we look forward, we think that has stabilized and now ready to grow. The last question on Console Server and Opengear, I want to highlight that the team does an amazing job with their channel and so Opengear and Console Server really does a nice job making sure the channel does not have too much inventory and that has never really been a challenge for us. We highlighted a few major customers that had slowed their deployments. And deferred some of their shipments to future quarters and these are a couple of larger customers. We didn’t see a huge impact from those customers in the December quarter. We do expect as the years go on — sorry, the quarters go on, excuse me, that they will start to return based upon the communications we’ve had with them and so that will contribute positively.
Opengear did grow quarter-over-quarter, even though were still down year-over-year, but it was down almost really exclusive on the back of what would label as our strategic customers.
Scott Searle: Great. Thanks. I’ll get back in the queue.
Operator: Thank you. One moment for our next question. And our next question comes from Mike Walkley from Canaccord Genuity. Your line is now open.
Michael Walkley: Great. Thanks for taking the question. Nice to see the guidance kept for the year, especially with Qualcomm highlighting kind of excess inventory they’re seeing the industrial IoT channel. I guess, Jamie, speaking to that inventory you’re working it down on your balance sheet, but how much do you think still tied up in working capital, in terms of excess inventory as you improve your cash flow versus where you think your inventory will be, maybe exiting this year.
Jamie Loch: Yeah, Mike. Thanks for the question. I do think there is still dollars that are tied up in there, namely part of the investment that we talked about last year that we made was our ability to procure components where we were seeing shortages and so really where a lot of that inventory relief will come from us as those components work themselves into finished goods. So, I think it’ll be kind of a slower run off, because those components are obviously part of finished goods and it will take us, I would say, reasonably the year to be able to work through those. I think we saw a good step down here in the first quarter, you’ll probably get something that’s less of a straight line and you could see a quarter where maybe it flattens out a little bit and then you take another step or maybe it’s a couple of steps, and then it flattens out a little bit and continues to step, but the real movement will come on that component side and I would say that that’s something that we would look out over the next four quarters is continuing to work itself through.
Ron Konezny: Yeah, and to be even more specific, we’ve got in excess of $30 million of components and that’s much higher than traditionally we have. We have maybe $5 million worst case $10 million components vis-a-vis last time buys. So, there is $20 million to $25 million worth of inventory that we, in normal times, we should not have or hold, but those will be worked off over time. Yeah, so there’s a bit of an inventory dividend that we certainly expect to benefit from over the following quarters.
Michael Walkley: Great. That’s helpful. And Ron, maybe just a follow-up question, you’ve been successful in integrating a lot of acquisitions to build out Digi to a solutions from a product — point product company as you highlighted in your script, but it seems like the capital structure now you’re focused on paying down that debt, but when you did restructure the debt, there is an option maybe to take on more debt, given your strong adjusted EBITDA generation. So, what’s your view, maybe in this market in terms of acquisitions and if you’re still acquisitive, what are some of the areas you might be focused on to drive longer value for Digi shareholders?
Ron Konezny: Yes, thanks for the question. The IoT market is just mass — the industrial IoT is massive, there is a ton of fragmentation opportunities and we think Digi will continue to be a leader in both organically growing, but also complement that with select inorganic opportunities. So, we are still very active. We maintain a really strong funnel of opportunities out there and — but we’re also very patient as well. I can say we have certainly, I think, been more disciplined here as interest rates have risen and we’ve been looking to pay down our debt and we really needed to bias our capital structure, especially in ’22 and ’23 towards inventory to service our customers that, as you can see from this recent quarter and some of our comments that Jamie and I had, we really not needed to have that type of posture with inventory now we can move more strongly into paying down debt, giving us more capacity for the right opportunities.
